Today saw the release of Markit Manufacturing PMIs from a host of European nations, with the UK posting the largest beat among the major countries, (M/M 55.5 vs. Exp. 51.3 Prev. 51.5, Rev. 51.8) printing at a 16 month high. This caused GBP/USD to move higher, breaking the 100DMA to the upside, before the pair was subject to profit taking. This week’s risk event for GBP comes on Thursday, when the BoE releases its rate decision, asset purchase target and quarterly inflation report in what has become known as ‘Super Thursday’. Participants will mainly focus on how the BoE manage expectations for rate lift-off.
Elsewhere, source reports in the Financial Times over the weekend stated that China may be buying German government bonds in order to assist the ECB’s QE program. This led to a steepening of the Euribor curve, unwinding some of the flattening seen after ECB President Draghi’s dovish press conference last week. This has bolstered EUR today, which managed to shrug off dovish comments by ECB’s Nowotny during the session. Nowotny claimed that the ECB had to act, as its inflation target was clearly being missed.
Finally, AUD traded relatively flat throughout the session, after seeing strength overnight in light of Chinese Caixin manufacturing PMI printing higher than expected (M/M 48.3 vs. Exp. 47.6 Prev. 47.2). Market participants will be keeping a close eye upon the rate decision tomorrow (2130CST/ 0330GMT), which is finely balanced, with 17 analysts surveyed expecting the bank to hold and 12 expecting a 25bps cut.
Looking ahead, tomorrow sees the release of the RBA rate decision, UK construction PMI, US factory orders, IBD/TIPP economic optimism and New Zealand employment and wage data. Comments are also expected from SNB’s Jordan and ECB’s Draghi.